Will BPOs be outside the tax ambit?

TNNFeb 23, 2006, 01.31am IST

NEW DELHI: Foreign companies outsourcing BPO and KPO work to their Indian arms can breathe easy about their tax liability in India.

In its first ever judgment given to US investment bank Morgan Stanley, the Authority for Advance Ruling (AAR) has held that the company's captive BPO in India is not its permanent establishment (PE). This means the income of the parent company will not be liable to tax here.

Morgan Stanley has a captive BPO in India — Morgan Stanley Advantage Services (MSAS) — which provides support services such as IT support, account reconciliation and research among others.